Many employers pay their employees earlier than the usual contractual payday at Christmas.
It is quite common for employers to bring the payroll forward to pay on the last Friday before the last full weekend before Christmas – e.g. a payroll that normally pays on 25 December 2023 may bring the payday forward to the 15th.
Changing the contractual payday has implications on Universal Credit (UC) due to The Universal Credit Assessment Period.
As above, bringing the physical payday forward has big implications, not just for cash flow but for the UC. The accuracy of this payment is all to do with the declaration of earnings via the Full Payment Submission (FPS). The UC payment is adjusted according to the amount that the individual is paid – the more earnings that fall into the UC Assessment Period, the lower the UC award.
When employees are in receipt of UC, employers, agents, bookkeepers and payroll functions need to be aware of these Assessment Periods. Each UC claimant will have their own monthly Assessment Period, starting with the date that they made their claim. This interacts with the information supplied on the FPS.
For example:
· An employee has a UC Assessment Period that runs from the 20th of one calendar month to the 19th of the following
· The same employee has a monthly contractual payday being the 25th of the month. If the payday is brought forward at Christmas, regardless of the date the employee is physically paid, the payment date on the FPS must always state the contractual payday, and this is important
Using the above:
In November 2023
In November, the employee is paid on 24 November 2022 (as the 25th is a Saturday) and that payment falls into the Assessment Period that runs from 20 November to 19 December. The UC payment is adjusted to reflect the fact that they were paid once, i.e. on 24 November 2022.
In December 2023
In December, the employer makes the decision to bring forward the payday (the 25th) to the 15th. The employer does not adjust the payment date data item declared on the FPS and it is declared as the 15th (rather than the 25th). Assuming the employee is next paid on 25 January 2023, the UC Assessment Period 20 December to 19 January will not record that the employee has been paid at all.
Yet, the UC Assessment Period 20 November to 19 December will be revisited and UK Government systems will say that in that UC Assessment Period:
· The employee was paid once on 24 November and
· Again on 15 December
The UC payment to the individual will be negatively impacted, simply because it looks as though the employee was paid twice in the same UC Assessment Period. The remedy:
If you pay early over the Christmas period, report your normal (or contractual) payday as the payment date on the FPS.
HMRC’s October 2023 Employer Bulletin carried this message and it is one to expect in future Agent Updates.
For Bookkeepers
Firstly, employers / bookkeepers / agents must report the correct payment date on the FPS. This is not the date that the employee is paid but is the date that the employee is contractually-entitled to be paid.
Secondly, it is a statutory obligation the FPS is filed on or before the date the employee is paid. Yet this does not apply when payday is brought forward at Christmas. HMRC have a permanent easement which is explained well on page 4 of the December 2019 Employer Bulletin when the easement first came into effect. The easement means that, where the payday is bought forward at Christmas, the employer can file the FPS on or before payday or on or before the payment date.
In terms of filing the FPS, using the above example of an employer that brings forward the December 25th payday to the 15th, the employer can:
· File on or before payday (the 15th) or
· On or before the contractual payment date (the 25th)
Employers / agents / bookkeepers can play an important part in regulating the earnings paid in the UC Assessment Period. This is especially the case when the payday is bought forward – commonly at Christmas, though employers are always bringing forward contractual paydays because of things like weekends and Bank Holidays.
Having paid early, employers do not want to negatively impact an individual’s UC payment. The Important Messages:
· The date an employee is paid is not necessarily the same as the date they are contractually-entitled to be paid.
· For pay - employees should be paid on the date that has been agreed. Timely payment is an important employment law consideration
· The Payment Date - the RTI data items declared on the FPS contain field 43 entitled payment date. This is the date that the employee is contractually-entitled to be paid, not the date that they are actually paid. It is the date declared in data item 43 that is the important RTI interaction with the Universal Credit. Payroll software must be capable of declaring the date that an employee is contractually-entitled to be paid, which may or may not be the date that they are actually paid
· For filing - normally, the FPS must be filed on or before the date the employee is paid. Although, when the pay day is bought forward at Christmas, according to HMRC’s permanent easement, the FPS can be filed on or before payday or on or before the payment date.
ICB Comment
ICB welcomes HMRC’s annual message that the RTI filing date changes when payday is bought forward at Christmas. We also relay to members the important interaction between RTI and Universal Credit, something that applies in every month of the year, not just December.
